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Covid-19: measures to prevent aggressive rent collection and closure

High street shops and other companies under strain will be protected from aggressive rent collection and asked to pay what they can during the coronavirus pandemic, with temporary new measures introduced by the government. These include temporarily voiding statutory demands and winding up petitions issued to commercial tenants, and changes to the use of commercial rent arrears recovery (CRAR) facilities

27 Apr 2020

Pat Sweet

Business secretary Alok Sharma said the majority of landlords and tenants are working well together to reach agreements on debt obligations, but some landlords have been putting tenants under undue pressure by using aggressive debt recovery tactics.

To head this off, the government will temporarily ban the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions presented from Monday 27 April, through to 30 June, where a company cannot pay its bills due to coronavirus.

The measures will be included in the Corporate Insolvency and Governance Bill set out earlier this month.

Government is also laying secondary legislation to provide tenants with more breathing space to pay rent by preventing landlords using CRAR unless they are owed 90 days of unpaid rent.

Sharma said: ‘In this exceptional time for the UK, it is vital that we ensure businesses are kept afloat so that they can continue to provide the jobs our economy needs beyond the coronavirus pandemic.

‘Our unprecedented package of support can help commercial landlords, including through the recent expansion of the coronavirus business interruption loans scheme.

‘I know that like all businesses they are under pressure, but I would urge them to show forbearance to their tenants. I am also taking steps to ensure the minority of landlords using aggressive tactics to collect their rents can no longer do so while the Covid-19 emergency continues.’

Kate Nicholls, chief executive of UK Hospitality, said: ‘Many businesses in our sector have no revenue whatsoever coming in, so paying rents has been out of the question for some.

‘This extra space will allow businesses to survive and to find a way to work with landlords.

‘If social distancing measures are to be in place for some time, as we now believe they will, this measure may need to be extended to ensure that businesses can survive.’

Under the measures, any winding-up petition that claims that the company is unable to pay its debts must first be reviewed by the court to determine why. The law will not permit petitions to be presented, or winding-up orders made, where the company’s inability to pay is the result of Covid-19.

The new legislation to protect tenants will be in force until 30 June, and can be extended in line with the moratorium on commercial lease forfeiture.

Andy Pyle, UK head of real estate at KPMG, said: 'There is a vital need for landlords and their customers or occupants to work collaboratively during this pandemic. Indeed, that is what the government and society at large is calling for.

'There are many examples of this already being the case, with the joint request from the British Retail Consortium, British Property Federation and REVO on a proposed rent support furlough scheme being just one notable example.

‘There are always going to be instances of occupants choosing not to pay rather than being unable to, but that should be an exception rather than the rule.

'This development from BEIS may unintentionally lead to less rental payments at June’s quarterly rent day, making the exploration of the proposed rent support furlough scheme all the more important.'